Nikkei Index ETF Investing Guide

The Nikkei Index ETF is a popular investment option for those looking to tap into Japan's economy. It's a basket of 225 top-performing Japanese stocks, making it a great way to diversify your portfolio.

The Nikkei Index ETF is designed to track the performance of the Nikkei 225 Stock Average, which is a price-weighted index that represents the top 225 companies listed on the Tokyo Stock Exchange. This means that the ETF will rise or fall in value based on the performance of these 225 stocks.

Investing in a Nikkei Index ETF can be a relatively low-cost way to gain exposure to the Japanese market, with many ETFs offering low expense ratios and no trading commissions.

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The Nikkei Index ETF is a type of exchange-traded fund that tracks the Nikkei 225 index. This index is Japan's best-known stock market index, tracking the 225 most actively traded stocks on the Tokyo Stock Exchange.

The Nikkei 225 index is unique because its weighting is based on share prices rather than market capitalisation. This means that the ETF investors can benefit from the price gains and dividends of the Nikkei 225 constituents.

Currently, the Nikkei 225 index is tracked by 4 ETFs.

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The Nikkei 225 index has experienced significant fluctuations over the years, with a historic high of 38,957.44 on December 29, 1989, before plummeting to a low of 7,054.98 on March 10, 2009, a drop of 81.9% from its peak.

The index continued to fall in 2011, plummeting more than 10% to 8,605.15 just two working days after a giant earthquake struck Japan on March 15, 2011.

The Nikkei 225 finally surpassed its previous high of 38,957.44 in 2024, reaching 42,224.02 on July 11, 2024, but then dropped to 37,869.51 by July 25, 2024.

Xtrackers Nikkei 225 UCITS ETF 1D has been a top performer, with a 1-year fund return of 15.94% as of December 31, 2024, followed closely by Xtrackers Nikkei 225 UCITS ETF 1C with a 1-year fund return of 15.93%.

Here's a comparison of the top-performing Nikkei 225 ETFs over 1 year:

The Xtrackers Nikkei 225 UCITS ETF 1D also performed well over 3 years, with a return of 16.09%, while the iShares Nikkei 225 UCITS ETF (Acc) trailed behind with a 3-year return of 14.66%.

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Here's a table showing the returns of various Nikkei 225 ETFs over different time periods:

The iShares Nikkei 225 UCITS ETF (DE) trailed behind the top performers, with a 1-year return of 13.72% and a 3-year return of 12.78%.

You can gain exposure to the Nikkei 225 through exchange-traded funds (ETFs), which offer diversification through a single investment.

ETFs trade throughout the day, allowing their prices to fluctuate like stock prices do.

Individual investors can use ETFs to gain exposure to the Nikkei 225 without the substantial tax implications of buying and managing individual stocks.

Using ETFs also provides the flexibility to trade the entire market as though you're trading a single stock, and can even be used for speculative trading strategies like trading on margin and short-selling.

ETFs allow investors to meet specific asset allocation needs, such as an allocation of 80% and 20% for stocks and bonds, respectively.

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You can gain exposure to the Nikkei 225 index from the U.S. by buying shares of an ETF that tracks the index.

There are several ETFs that track the Nikkei 225, but one of the most straightforward options is the MAXIS Nikkei 225 ETF, which is denominated in U.S. dollars and listed on the New York Stock Exchange's electronic ETF trading platform.

You can trade the MAXIS Nikkei 225 ETF through a brokerage account, such as Fidelity Investments, which offers international trading accounts.

Investing in Japanese ETFs can be complicated due to currency risk, but the MAXIS Nikkei 225 ETF is a good option for U.S. investors who want to gain exposure to the Nikkei 225 without worrying about exchange rate fluctuations.

The MAXIS Nikkei 225 ETF has more than $80 million in assets under management and trades on the ARCA platform.

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TOPIX is a major index that tracks the Tokyo Stock Exchange, ranking stocks by free-float adjusted market capitalization.

It tracks all domestic companies listed in the First Section of the Tokyo Stock Exchange, which includes 2032 companies as of October 2017.

TOPIX is often argued to be a better representation of Japan's stock market due to its weighting differences with the Nikkei Index.

One key difference between TOPIX and the Nikkei Index is that TOPIX includes a larger number of companies, making it a more comprehensive measure of the market.

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Derivatives offer a way to invest in the Nikkei 225 index without directly buying shares.

The Nikkei 225 futures are a popular derivative product, traded on stock exchanges around the world.

Introduced in the Singapore Exchange in 1986, the Osaka Securities Exchange in 1988, and the Chicago Mercantile Exchange in 1990, these futures contracts allow investors to speculate on the price movement of the Nikkei 225 index.

Investors can use these contracts to bet on whether the Nikkei 225 will rise or decline.

Countries such as the United Kingdom, the United States, France, Switzerland, Italy, and Germany all have ETFs that track the Nikkei Index, providing another way to invest in the derivatives market.

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You can gain exposure to the Nikkei 225 by buying shares of an ETF that tracks the index, as it's not possible to invest directly in the Nikkei 225 from the U.S.

ETFs trade throughout the day, just like stock prices do, and offer diversification through a single investment.

They have lower expenses than actively managed funds and are priced throughout the day, unlike mutual funds.

To trade ETFs that track the Nikkei 225, you'll need to open an account with a brokerage that lets you buy and sell investments not listed on a U.S. exchange.

Several ETFs that track the Nikkei 225 trade on the Tokyo Stock Exchange, including Blackrock Japan's iShares Nikkei 225 ETF and Nomura Asset Management's Nikkei 225 Exchange Traded Fund.

Keep in mind that trading ETFs in their local markets has complications, such as monitoring exchange rate fluctuations between the yen and the dollar.

Investors can use ETFs to trade large volumes and redeem them for shares of stocks that the ETF tracks, allowing for a unique trading strategy.

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The Nikkei index is comprised of 36 different industries, including technology, financials, and consumer goods. This diversity is a key factor in its popularity among investors.

Some of the well-known Japanese companies in the Nikkei 225 include Canon Inc., Panasonic Corp., and Toyota Motor Corp. These companies are household names in Japan and are a significant part of the country's economy.

Investors can gain exposure to the Nikkei 225 through exchange-traded funds (ETFs) that track the index. This allows individuals outside of Japan to invest in the Nikkei 225 without the need to buy individual stocks.

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The Nikkei 225 index is home to some of Japan's most iconic companies. The index includes well-known brands like Canon Inc., Panasonic Corp., and Sony Corp.

These companies are spread across various sectors, including technology, financials, and consumer goods. The Nikkei 225 index comprises companies from 36 different industries.

Some of the notable holdings in the index include Nissan Motor Co. and Toyota Motor Corp., both leaders in the automotive industry.

You can gain exposure to the Nikkei 225 through exchange-traded funds (ETFs) whose underlying assets correlate to the index.

ETFs trade throughout the day, just like stock prices do, and offer diversification through a single investment.

They have lower expenses than actively managed funds and are a cost-effective way to invest in the Nikkei 225.

Unlike mutual funds, ETFs are priced in real-time, allowing investors to buy and sell throughout the day.

As an individual outside of Japan, the best way to gain exposure to Japanese companies is through American Depository Receipts (ADRs) or exchange-traded funds.

You can trade ETFs as though you're trading a single stock, making it easy to meet specific asset allocation needs.

Investors use ETFs for speculative trading strategies like trading on margin and short-selling, and can also take advantage of ETFs to reduce tax implications.

ETFs allow investors to trade large volumes of them, redeeming them for shares of stocks that the ETF tracks, making it a unique and flexible investment option.

If you're looking to invest in Nikkei 225 ETFs, it's worth considering the largest funds by fund size in EUR. The Xtrackers Nikkei 225 UCITS ETF 1D takes the top spot with a massive 1,475 million euros in fund size.

You might be wondering what other options are available. The iShares Nikkei 225 UCITS ETF (Acc) ranks second with a fund size of 314 million euros.

If you're interested in comparing the top three funds, here's a quick rundown: